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Mellon Capital Management1 and The McKnight Foundation just unveiled a new case study, authored by pfc Social Impact Advisors, which examines the development of the Carbon Efficiency Strategy (CES) and explores several challenges and lessons learned. The CES was created by McKnight, Mellon Capital, BNY Mellon, Mercer and Imprint Capital to offer investors a lower-carbon solution to equity investing, while also fulfilling their fiduciary responsibility. It was announced in late October 2014 by Gabriela Franco Parcella, CEO of Mellon Capital, and Kate Wolford, president of The McKnight Foundation.

During the nascent stages of the CES’s formulation, the project leaders found that it was no easy task, as it involved multiple parties, divergent interests, strong opinions, conflicting values, confusion about responsibilities, and a context that was both urgent (climate change) and reluctant (the traditional financial sector and the traditional philanthropic sector).

Through persistence and collaboration, the partners were able to finalize a Carbon Efficiency Strategy that provided broad equity exposure cost-effectively, while assessing, recognizing, and supporting strong climate performance. This was achieved by using a combination of rewards, penalties, and screening for climate-related behaviors and proxy voting in support of shareholder resolutions and other corporate initiatives related to climate risk, performance, and disclosure.

As the CES was being developed, BNY Mellon engaged in a redesign of its corporate social responsibility strategic framework, which evolved to include Social Finance – any investment activity with a positive social and/or environmental impact. The CES meets all five conditions that BNY Mellon has outlined as important to scaling social finance: accessibility, measurement, transparency, systemic change and collaboration.